09:18 MUDAN AUTO<08188> - Yearly Results Announcement (3) (2) As shown in note 19 to the financial statements, a provision of RMB 8,147,484 has been effected to write down certain of the Company's inventories of RMB36,866,708 to their net realisable value. In arriving at the aforesaid provision, the company has written back inventory provisions made in prior period amounting to RMB2,877,990 during the current year, and reversed deferred tax asset of RMB949,733 recognised previously in respect of the above. Due to the lack of detailed analysis of the condition of these investories and adequate financial information in respect of estimated net realisable value, the auditor were unable to carry out auditing procedures necessary to satisfy themselves as to whether this provision was appropriate and adequate. Any adjustment to the figure may have a consequential effect on the loss for the year and the net assets at 31 December 2004 Note 19: 19. Inventories Inventories represent: 2004 2003 RMB RMB Raw materials 28,732,759 36,727,124 Work in progress 21,110,761 30,568,214 Finished goods 37,545,368 52,925,349 Total 87,388,888 120,220,687 Inventories stated at net 28,719,244 23,239,319 realisable value (3) As shown in note 21 to the financial statements, the company has a balance due from its shareholder, Jiangsu Mudan Automobile Group Company Limited("Jiangsu Mudan"), amounting to RMB203,176,037. Due to lack of detailed ayalysis and adequate financial information in respect of Jiangsu Mudan, the auditor were unable to carry out auditing procedures necessary to obtain adequate assurance as to the recoverability of this amount. Any adjustment to the figure may have a consequential effect on the loss for the year and the net assets at 31 December 2004. Note 21: 21. Amounts due from/to shareholders/a related company Amounts due from/to shareholders/a realted company are interest free and with no fixed terms of repayment. The balances arose from the related party transactions are disclosed in note 30. (4) Note 30 to the financial statements disclosed certain related party transactions of the Company. Due to the lack of adequate documentary evidence, the auditor were unable to carry out their auditing procedures necessary to satisfy themselves as to the accuracy of the disclosure in respect of items (i), (vi) to (ix) and (xi) to (xv) in that note. In addition, the auditor were unable to carry out auditing procedures necessary to satisfy themselves that the disclosure in note 30 is complete. They were also unable to carry out auditing procedures necessary to satisfy themselves as to whether the cash flows in connection with related party transactions as presented in the company's cash flow statements were fairly stated. Note 30: 30. Material Related Party Transactions Particulars of material transactions between the company and certain related parties in which a director or a shareholder of the company is in a position to exercise significant influence are as follows: Note 2004 2003 RMB RMB Purchases from shareholders/a related company (i) 55,334,245 67,015,391 Rent paid for land use rights (ii) 905,500 786,833 Rent paid for property (iii) 100,000 100,000 Rent paid for conveyor belt system(iv) 100,000 - Management fee received (v) - 50,000 Acquisition of fixed assets (vi) 609,162 68,080,923 Subcontracting fee paid (vii) - 9,892,723 Sales of scrap materials (viii) 1,525,928 827,402 (i) This represents purchases of raw materials from the shareholders/a related company (Zhangjiagang Mudan Bus Body Stamping Co., Ltd., Zhangjiagang Mudan Automobile Accessories CO., Ltd., Zhangjiagang Mudan Bus Parts Co., Ltd., Zhangjiagang Automobile Accessories Factory and Zhangjiagang Jishun Trnasportation Industrial CO., Ltd.) during the year. (ii) The Company has entered into lease agreements with Jiangsu Mudan whereby the Company is granted rights to use four (2003: four) pieces of land in the PRC on which its buildings are erected for a term of 20 years. The annual fixed rental payment is RMB905,000 (2003:905,000).